Parent firm McAleese forced to act due to 60 per cent fall in subsidiary’s income
McAleese Group will restructure its Cootes Transport tanker arm following its loss of two big fuel contracts.
Cootes is a failed retenderer for the national Shell contract and did not make the shortlist for BP’s New South Wales contract, though it remains part of the tender process for BP’s national contract.
Separately, Cootes has given 7-Eleven termination notice on its NSW and Queensland deals “for reasons of poor profitability”.
Gas transport operations and the Liquip manufacturing businesses of McAleese Oil & Gas will escape the restructure.
Both the BP and 7-Eleven terminations will come into effect at the end of June.
McAleese puts the annual value of the lost contracts at $92.5 million, which is about 60 per cent of revenues for Cootes.
“McAleese Group will seek to mitigate the impact of the contract losses through the proposed restructure and expects that he costs of the restructure will be incurred [this financial year],” the company states.
“At this stage, we are reviewing what the structure of the business will be going forward and will provide our employees and our shareholders with guidance once the remaining scope of BP work has been announced and the restructure plan is finalised,” a company spokeswoman says.
“We will, however, be working closely with our staff during this period and we hope to see many of our people transition to the new operators once these operators are announced.”
But McAleese is wary of the implications of the news for its operations before the contracts end.
“There is still five months of work that we are contracted for, so we are hopeful that our people will want to continue in their roles during the remainder of the contract period,” the spokeswoman says.
Despite the downsizing, it remains committed to turning Cootes around and the move will not affect improvement processes already underway.
“Cootes will be a smaller business but we will focus on improving service levels, operating performance, and our costs so as to ensure it generates appropriate levels of returns,” the spokeswoman says.
“Regardless of the outcomes for the restructure, we are committed to improving this area of our business.
“The review is continuing and as previously stated we will ensure that any key learnings arising from the review will be applied to other areas of our business where relevant. “
The Cootes fuel business is predominately a company driver fleet but McAleese “will work through any implications for subcontractors” consistent with its pledge to transfer employed drivers to contract winners
Along with the personnel changes, the fleet will be rationalised.
“We own our fleet and we will look to redeploy assets and dispose of surplus older assets as required,” the spokeswoman says.
“This will form part of our restructuring activities and will be dependent on a number of matters including the outcome of the BP tender.”
Cootes hit headlines last year following a deadly crash in Sydney’s Mona Vale and huge negative publicity over truck maintenance revelations subsequently.
The scandal came at a bad time, with BP and Shell in the midst of tender processes – in BP’s case, starting in April, for 8 billion litres a year nationally, with the outcome expected soon.
A BP spokesman would not be drawn on the background other than to say: “BP is aware of the McAleese announcement, but as the company is in the midst of a tender exercise for national haulage contracts, it would be inappropriate to comment further.”